I am back writing the Ponderings after what feels like an eternity, which is no surprise when you consider what has happened since I last wrote the Ponderings, at the beginning of February. Since February, the task of writing the Ponderings has fallen to many colleagues who have more than risen to the challenge. I will try my best to maintain the high standards that have been set, but I cannot promise anything!
The year so far has been a strange one. It started well, as the Tories victory in the General Election appeared to have a positive impact on the economy, but that was perhaps short lived, due to the virus, or rather the precautionary measures imposed by our duly elected Government. As a firm, we did our very best to continue assisting clients through the ‘lockdown’, and I am proud to say that on the whole, and with the assistance of technology, we managed to continue providing the high level of service which clients expect of us. Credit must also go to clients for their willingness to adapt to the challenging circumstances and to adopt new practises. I can recall a number of instances where clients of “advanced years’ have been quite content to undertake a meeting with me over Zoom. Once again, the agricultural industry has demonstrated its ability to adapt. This will hopefully stand the industry in good stead for the proposed reduction in subsidies, over the next 7 years.
Changes are afoot already. We are busy assisting farming clients to look at their farming arrangements, resulting in various changes. I have helped a number of clients (landowners and tenants alike) take a step back from hands on farming and move to contract farming; clients often end up asking why they have not taken this decision sooner! Contract farming provides a great deal of flexibility and can be extremely tax efficient, if structured accordingly. It also provides an opportunity to increase profitability, due to the economy of scale that a commercial contractor is able to offer, and the reduction in overheads, such as machinery depreciation and running costs.
We have also seen an increase in the number of clients with no direct successors, wishing to surrender Agricultural Holding Act tenancies, in return for a lump sum payment to allow for retirement. It could be argued that rents are easing and land prices have plateaued, reducing the potential uplift available to a landlord, however in our experience there is still a substantial premium available to the landlord, if he is able to obtain vacant possession of his holding. Early advice is key to maximising value.
Back in February, I touched on telephone masts, following the introduction of the new ‘Code’. We continue to assist numerous clients who are affected by existing and proposed masts. The industry is in stasis. Site operators continue to offer substantially reduced rents, and landowners continue to demand rents at existing levels of say, £5000 - £6000 per annum. The government still have not intervened, on the face of it, this is perhaps not surprising, given what they are currently dealing with. However, one of the primary reasons for the new code allowing site operators greater powers, was to increase connectivity to high quality broadband and mobile phone coverage. With the government once again actively encouraging people to work from home, where they can, the need for high quality broadband and mobile phone coverage is perhaps greater than ever. In recent months, there are been a number of cases decided at the Lands Tribunal relating to various issues relating to renewal procedures, the validity of notices, but none of these have provided a definitive answer concerning how the rent should be assessed. As such, the industry remains in limbo, with neither side willing to concede. Whilst the rent is important, there are other equally important factors that should be considered, especially if reduced rents are accepted, such as access, the ability to move a mast to facilitate development, and the impact of exclusion zones. Please contact a member of the Agricultural Team, if you are affected by a telephone mast, where the operators are seeking changes to the status quo.
Michaelmas 2020 (29th September) has been and gone, but ‘New Michaelmas’ (11th October) is fast approaching. This is perhaps pertinent for agricultural tenants with 11th October term dates, seeking to reduce rents. Over the past few weeks, we have been assisting clients with rent reviews for notices served last year, and with serving notices to allow a review next year. For notices served last year, we have seen decreases this year, especially those that were tendered on the open market and were in excess of £200 per acre.
On the whole, most clients have chosen not to serve notice this year, to allow a rent review in Michaelmas 2021, as they believe that the effect of the reduction in subsidies will not truly be felt until 2022, at the earliest. I expect to busy serving notices next year. If you do have an 11th October term date, and are minded to serve notice to review your rent, then do please contact a member of the Agricultural Team in good time.
I wanted to finish this month’s Ponderings, by reminding farming clients that the greening requirements, under the Basic Payment Scheme, have been removed in respect of the 2021 scheme year. In short, this means you are free to grow whatever crops you choose, in whatever areas you choose, and are not required to have an ecological focus area on the farm. This should greatly assist Contract Farming Arrangements where growing three crops on as little as 75 acres has been a real pain.
I am not sure when I am scheduled to write the Ponderings again, so I would like to sign off by wishing you all the very best for the Autumn and Winter, and I sincerely hope that the weather is not as abysmal as it was last year.
Christopher Templar - Salaried Partner
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